Sweeping higher ed overhaul

01/31/2014

POLITICO.COM January 31, 2014.The Education Department’s regulatory machine will be churning at high speed for the next year, with results that could affect which for-profit colleges get federal financial aid, whether parents can easily get loans for their children’s college education and how colleges and programs like Teach for America prepare teachers for the classroom.

The White House said in documents accompanying the State of the Union on Tuesday night that President Barack Obama also will use executive authority to encourage colleges to innovate. The Education Department was already working on this project, proposing waivers to some financial aid rules so colleges have space to experiment.

Though higher education received little attention in the State of the Union itself, the Education Department still has a full regulatory agenda in the works: The department is undertaking a controversial effort to rate the value of every college in the U.S. And a parallel regulatory process by the Federal Communications Commission aims to vastly expand Internet access to schools and libraries.

The agenda is a big departure from President Barack Obama’s first five years, when he wielded executive power and billions of dollars in incentives to shape policy from pre-K to 12th grade. Now, aside from the FCC’s Internet initiative — which Obama said at the State of the Union is forging ahead with the help of private industry — the administration’s focus is largely on higher education.

But the administration has never had as many carrots for postsecondary education as for K-12.

In higher ed, nearly all federal financial aid goes directly to students, not to states. And Congress has resisted the president’s 2012 proposal to create a higher education version of the Race to the Top grant program that encouraged states and school systems to go along with his agenda.

So the administration turned more to its traditional regulatory sticks for colleges and universities, with mixed results so far.

The gridlock in Congress has shifted the Obama administration’s focus even more to regulation, said Terry Hartle, senior vice president at the American Council on Education.

“It has enhanced the authority of administration agencies — not just the Department of Education but all of them,” Hartle said in November. “Congress not only can’t do anything, they find it very hard to block federal agencies.”

The department invites interest groups to participate in its regulatory agenda, providing a preview of what’s to come.

It’s going to be busy.

“We’re continuously meeting and collaborating with members of the education community, including Congress,” said Stephen Spector, a department spokesman. “As the department continues to pursue regulatory and deregulatory activities across the education system, we remain steadfast in our commitment to protect students, improve inefficiencies and promote excellence.”

Two regulatory proposals are in the works, at least in theory. Their negotiations concluded without consensus, meaning the Education Department has free rein to draft the regulations on its own.

One rule would govern vocational programs, as well as all programs of study at for-profit colleges. If graduates of those programs can’t find “gainful employment,” defined as a job that allows them to pay back their loans, future students who hope to enroll in that field would lose access to federal financial aid.

This is the Education Department’s second try at writing a version of this rule: The first attempt, finalized in 2011, was thrown out in court. The rulemaking process for a second attempt ended in December, and a draft of the new regulations is expected in March.

Only gainful employment can be said to be on the fast track. But it’s not a given that any program will lose its eligibility for federal financial aid as a result.

Education Department analyses of an early department proposal estimated that about 13 percent of programs would fail, either because their graduates’ debts are too high in proportion to their incomes or because too high a percentage of students default on their loans. But under that proposal, programs would have to fail twice in three years to lose their eligibility.

Given that the 2015-16 academic year is the earliest a rule could take effect, it’s possible — but not assured — that some programs of study would lose eligibility near the end of Obama’s term.

Another rulemaking panel also failed to reach consensus on new rules for teacher preparation programs in 2012. Those regulations are still stuck in Education Department purgatory. They’re widely expected to follow other administration proposals to hold colleges of education accountable for how their graduates’ pupils do on standardized tests.

But almost two years after rulemaking concluded, the regulations are still under development. The issue remains a priority, but the Education Department has “capacity issues” and “a full plate on the regulatory front,” Assistant Secretary Gabriella Gomez said at a breakfast with reporters in December. The department has not yet sent its proposal to the White House Office for Management and Budget for review — the final step before draft regulations are made public.

Meanwhile, the department has convened two new regulatory panels. One will deal with whether distance education programs will need to get some kind of permission — often costly — from the states where they are located. That panel will also tackle a controversial change to underwriting criteria for federal loans to parents, which has caused loan denials to spike at historically black colleges, and write new rules to counter reports of abuse of prepaid debit cards used for college financial aid.

Another panel will decide on new rules under the Violence Against Women Act.

The department’s process is more open — and more ponderous — than those of many agencies. The Education Department shapes its regulatory policy through negotiated rulemaking, in which people from colleges, advocacy groups and the department gather around a table at the department’s Office of Postsecondary Education and, in daylong sessions spread over several months, attempt to hammer out an acceptable agreement on new regulations.

In theory, negotiated rulemaking, which is required by the Higher Education Act, was meant to create litigation-proof, stakeholder-friendly regulations. In practice in recent years, it’s often provided just another forum for arguments about the regulatory agenda itself.

Taking action without waiting for legislation was also the patten during Obama’s first term, when the Education Department used grants and waivers to significantly reshape the K-12 education policy landscape while Congress sat on its hands.

The department handed out billions in state and district-level Race to the Top grants and issued dozens of waivers from the Bush-era No Child Left Behind law — all of which came with policy strings attached. The administration also undertook the first major accountability initiative for Head Start in the program’s history, forcing even longstanding grantees to reapply for funding.

“I feel like they’ve done so much on K-12, they kind of have to let what they’ve done play out,” said Kate Tromble, director of legislative affairs at the Education Trust.

Now the department plans to keep making sure states fulfill their promises, and has threatened to yank waivers if they don’t comply with the plan.